My Automated Trading Strategy (3Years+ of Historical Data) Please Critique!

Quote from jedwards:

Before your start accepting your platitudes for building an ATS, I imagine this forward testing period is going to be pretty educational for you :D

As far as I'm concerned, you have programmed a backtrading strategy, but it's not a full-blown ATS just yet. There's a lot of things you're going to learn over the course of trying to get this to stay up-and-running 24x7, which I guess is what your strategy will rely on. If you don't have any white hairs yet, you will by the time you're done at the ripe old age of 16 :)

For example: data feed goes down 5 times? NT will disable your strategy. Happened to me. What if the internet connection goes down just before you're about to exit a position? Happened to me. At 1am in the morning while trading the DAX. What if your order gets rejected by the exchange for some mysterious reason? Happened to me. What if you place a stop limit order (possibly with limit orders as well) and the price drops down below your limit price just as you send the order? NT will throw an exception, and the strategy will get disabled. Happened to me. What if you start trading multiple contracts, and you only get filled on some of the contracts? Does your code make sure it to keep track of the number of filled contracts, and not trade based on the number of expected contracts? Because if you buy 1 contract and then sell 2, you'll be in a net short position. Etc, etc, etc.

You'll learn that there are many, many ways in which your strategy will fail due to external factors, and you'll need to account for all of these. This can't be simulated through backtesting, and not even thru sim-testing.

You'll have to be sitting in front of the computer while it's trading and making sure that you handle all exceptions. You'll also need extremely good logging to make sure that you can figure what happens if things do go wrong. I added code that will email me the results of trades that I run when I'm not around, so that I'm not sitting around wondering WTF happened.

There's *a lot* of exception handling related to trades and order management that you will need to handle in order for you to be able to sleep at night or even leave your computer to relieve yourself. Once you start trading for real, one bug in your trade management, and you could lose your shirt.

This is why I keep my trading simple. I never hold positions overnight and I keep most of my trading confined to the first 3 hours of the market being open. I've traded HSI and DAX and for those I'm either at work or sleeping, but I've thoroughly tested those and for the most part I've worked out the bugs.

So like I said, creating a backtesting strategy is about 1/5th of the journey. The rest is adding the exception handling and boundary conditions that will keep you from going broke because of a trade gone awry!

But it will be a great learning experience, nonetheless! :)
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HAHAH! I sure hope I don't have grey hairs ;) lololol

Yea for sure, I have yet to put any money in an automated strategy, so we will have to see.

I probably going to have to teach my mom about trading so she could watch the strategy when I'm at school lol.

I just gotta hope now that my strategy is perfect :D :D :D
 
I have limited experience in anything (ATS space) other than turn-key systems, but there is a lot more low-hanging fruit in spreading delta-one instruments or vol-trading. I would look to spreading futures over taking outright spot trades.

IMO I would look into FI yield-curve trading or switches and cracks in CL and products. Or go into equity options.
 
Quote from jedwards:

I imagine this forward testing period is going to be pretty educational for you :D

...

creating a backtesting strategy is about 1/5th of the journey.

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Agree 100%. Forward walk is very important, it is all too easy to fool oneself with something that backtests great. I haven't read the entire thread but if data is 3 years 2007 - 2010, try testing the same strategy for 3 years 2003 - 2006 or any other untested 3 year period, while not a forward walk that will at least yield some clue as to the validity of the strategy over out-of-sample time periods.
 
Julian,

-Don't spend all your time backtesting. I lost 3 years of my life doing it only to finally find success trading discretionarily. A simple system exploiting market inefficiencies or a known bia of a market beats any indicator based optimized trading system. Backtesting can be useful but only to validate something that "should" work IMO...

-15K for "education" at 14??? Listen here, you just need free platform, free histos, free backtester right now. Don't pay anything until you are a consistently profitable trader. All the best information or at least the one you need is free. Personally, after 5 years trading professionally, I use a platform that cost 500$ a month and a charting website for 200 $ a year... That's all, and you don't really need more.

-Starting trading at such a young age can be really promising. If you do it right, at 20, you will have the money, the girls, the house...All the really successful people I know are not typical college grads who dreamed about corporate life. They are more self made business owner that had a passion for something and started doing it really young.
 
Quote from TraDaToR:

Julian,

-Don't spend all your time backtesting. I lost 3 years of my life doing it only to finally find success trading discretionarily. A simple system exploiting market inefficiencies or a known bia of a market beats any indicator based optimized trading system. Backtesting can be useful but only to validate something that "should" work IMO...

-15K for "education" at 14??? Listen here, you just need free platform, free histos, free backtester right now. Don't pay anything until you are a consistently profitable trader. All the best information or at least the one you need is free. Personally, after 5 years trading professionally, I use a platform that cost 500$ a month and a charting website for 200 $ a year... That's all, and you don't really need more.

-Starting trading at such a young age can be really promising. If you do it right, at 20, you will have the money, the girls, the house...All the really successful people I know are not typical college grads who dreamed about corporate life. They are more self made business owner that had a passion for something and started doing it really young.
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About the education... I agree. Complete waste of money, and I wish my parents could get it back. Unfortunately, at the time, I was naive and thought that it was necessary. Turns out because of my story being on tv and the newspaper (being 12 when I joined OTA) they racked up 100k in sales, and when I asked for something in return, I got no response.

Thanks for the compliment!
 
Quote from jedwards:

So, how is the results from sim-testing this working out? Is it going as expected?
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So far execution (which is what I've been focusing on the last 2 weeks), have been fantastic. I've actually had a few trades that were entered better than what a limit order would have given, as it enters against the momentum usually.

P/L wise it made about $200 this week. Normally you would see + or - 1-3k so this week was kinda a non event, given how choppy oil has been.

So definitely no worries so far on execution.

I am now going to focus on all the potential hazards that can arise while the system is running.

Thanks for asking!

Julian
 
Just another message of encouragement Julian: don't let the haters/doubters get you down. Hate/doubt comes from jealousy, pure and simple. People also interpret confidence as arrogance when they feel threatened. You obviously have intelligence and a bright future, so stick to your guns and don't let your ideas and ambitions be swayed by those who lack the desire and intellect to achieve their own.

I wish I had started in my teens instead of having a great idea for 8 years and then finally starting to act on it in my 20s.
 
Quote from andrewj:

Just another message of encouragement Julian: don't let the haters/doubters get you down. Hate/doubt comes from jealousy, pure and simple. People also interpret confidence as arrogance when they feel threatened. You obviously have intelligence and a bright future, so stick to your guns and don't let your ideas and ambitions be swayed by those who lack the desire and intellect to achieve their own.

I wish I had started in my teens instead of having a great idea for 8 years and then finally starting to act on it in my 20s.
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Thanks for the kind words! I really appreciate it. I am grateful that my parents have allowed me the freedom to follow this passion.
 
Quote from julian0625:

So far execution (which is what I've been focusing on the last 2 weeks), have been fantastic. I've actually had a few trades that were entered better than what a limit order would have given, as it enters against the momentum usually.

P/L wise it made about $200 this week. Normally you would see + or - 1-3k so this week was kinda a non event, given how choppy oil has been.

So definitely no worries so far on execution.

I am now going to focus on all the potential hazards that can arise while the system is running.

Thanks for asking!

Julian
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Nice! when will you start live trading?
 
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